The Fosun Development and Empire
Club Med is a renowned, upscale French leisure group that specializes in curating vacation-worthy tourist destinations. Its all-inclusive resorts offer a variety of leisure activities, including fine dining, yoga, scuba diving, and baby gymnastics courses. Over the years, Club Med has successfully expanded through a series of strategic moves, such as signing a 10-year agreement with the Chinese group China Pao Shan in 2011 to expand a holiday village in China and aiming to double its capacity to 300 rooms for 2013, along with plans to increase from four to fifteen all-inclusive village resorts between 2016 and 2020. According to the Taipei Times and Bloomberg, a consortium led by Fosun acquired Paris-based Club Med in 2015 for approximately 939 million Euros (US$969 million), besting Italian investor Andrea Bonomi in a year-long bidding war. Included in the Fosun empire are the English Premier League’s Wolverhampton Wanderers, Portugal’s largest bank Millennium BCP, the French fashion house Lanvin, and resort proprietor Club Med.
Fractures In The Crown
In recent years, the resort chain has faced expanding financial concerns, followed by a decline in the tourism industry due to the COVID-19 pandemic and China’s quarantine policies. The Taipei Times reported that by 2022, Fosun Tourism shares in Hong Kong trading had decreased by 19 percent, giving the company a market value of approximately HK$10.5 billion (approximately US$1.3 billion). In the same year, Fosun, which owns Club Med through its listed leisure arm Fosun Tourism Group, evaluated a number of assets, leading to speculation (but no certainty) that it may decide to move forward with a transaction. A representative for Fosun told the Taipei Times that the company has “no plans” to sell Club Med. According to Forbes, however, Fosun has been unable to raise capital due to China’s real estate market’s debt crisis, causing it to “sell off assets before it defaults on its short-term debt”
Fosun is incurring debt in an effort to finance its other significant acquisitions, resulting in an inability to meet its short-term obligations, which portends additional difficulties. Forbes reports that Fosun International’s dollar bonds recently reached record lows. This has resulted in a snowball effect in which shares of Fosun International have “tumbled” nearly 50 percent between 2021 and 2022, reaching a 10-year nadir since the company’s 2007 listing. As of 2022, Fosun International’s total liabilities amounted to approximately 650 billion Yuan (nearly $90 billion). Bloomberg also reported in 2022 that Fosun intended to sell assets worth $11 billion in 2023.
What Follows?
In May 2023, Fosun International agreed to sell 80% of its stake in the diamond-related investment arm of Alpha Yu for $455 million to a fund managed by New York-based Blackstone. According to reports, Fosun Tourism’s business volume increased by “a staggering 24 percent” in the first half of 2023. This was fueled in part by the revitalization of Club Med and the “company’s ability to raise room rates well above pre-recession levels.” The Fosun Tourism Group now expects a profit of 430 million Yuan in the first half of 2023, compared to a loss of 197 million Yuan during the same period in the previous year. Even though Fosun’s profits are on the rise, the company must catch up to its rivals and regain the confidence of investors in order to sustain its growth.
We anticipate that Fosun will sell Club Med’s regained development in the near future as a means of regaining financial stability and mitigating accumulated losses.
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